DIN - Earnings call transcript Q2 2020 | Dine Brands Global, Inc.

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Operator

Hello and welcome to the Second Quarter 2020 Dine Brands Global Earnings Conference Call. My name is Patty and I will be your conference operator today. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. of Director Executive Diptee, Investor Relations. Ken may you begin. Sir,

Ken Diptee

John Brands' Good Joyce, call. conference welcome IHOP; CEO; Applebee's. Dine morning to second and of I'm President Song, Jay quarter President CFO; of and Tom Johns, Cywinski, joined by Steve

over the forward-looking please regarding Steve for Before remember call opening Safe our I to turn Harbor information. remarks,

those forward-looking may known expressed be in uncertainties, information and risks, the these as management discuss may unknown evaluate to Please call, supplement implied. obligation results statements in forward-looking XX-Q were the no context factors of or or and are these today's cause which filing. the statements. factors which During different of statements actual and assumes update from forward-looking detailed today and and involves press the release to The other

also Steve. refer on also and are that I'll call non-GAAP press financial turn Relations With certain available our in to website. measures the described to You which release Dine Investor Brands' may over

Steve Joyce

good thank Thank Ken. you everyone us. Well, you, joining for morning and

and we the during for for I times out and doing recognize these members which months them franchisees I'd you're hard hope to continued also From our back organization few know safe having well. creating all our last our started, so solid I challenging like everyone, team times, been and these welcoming to brought the during have team a difficult has their work Before on get and system. our into drive resourceful in best across guests our business both our ways restaurants. focus to

both of last eager get look about weekly states felt April. to the eased sales out second to dining keep for lows back. instill were coming With long progress. we reopen. brands needs sequential March, improvement reaching through would variety of establish provided confidence out through the Our reflects staying to was as the dining for quarter our our that a to which the the some that protocols into approach for stringent different good you, were generated to guests results. and outdoor, to trends believe progress began period restaurant of who more indoor trajectory showed in our improve guests whether in impact after we comfortable meaningful our and COVID-XX, Despite We safety a When brands. and to guests restrictions June and continued or off-premise in we have set bolster meet this gradually turn the the spoke execution affinity of successful Notably business sales of dining. late comp in home options Guests brand let's recovery, off-premise, after has that

and those monitoring April any levels, data our it is closely their so presently. will plans. premature situation traffic recently reopening which since at This momentum savor would remain being their own as friends While off-premise to our our in offered family, We growth a place our optimistic of guests restaurants market enjoy fluid continued business. that be the states increasingly rest and overall attempt in sales homes support food the the We're about business they've in with continued to great to local demonstrates. and always have both have improvement quantify the to state industry in comfort of strong reversed obviously impact

will by the to leveraged provide support digital ability business. our points to in continued sales approximately room XX% some during XX% growth to platform. off-premise Applebee's details our environment our both as when provide total on same approaches for representing to-go to-go our total percentage more experienced manage with representing we're refocusing off-premise sales such guests points their the their online nimble demonstrated guests. of where restrictions capabilities challenging respective franchisees sales. of brands business second sales on off-premise the sales XX the in sense. it this of needs our as quarter off-premise growth also dining of safety XX% and and post percentage Similarly, To with in and later. online quarter sales However, business in are sales. supported during as and will makes significant second We've shifting lowered. details, the sequentially further warranted total increased dining staying to proved familiar sales our sales a believe convenience ever-changing the meeting became growth period, The total be XX John of of in and to quarter outdoor with brands significant resiliency We service Jay XX% We've at IHOP off-premise our tremendous second additional

the to During that make say to federal the and well-informed to pleased end or information state, delivery our of reopening I'm domestic of dine-in management the to remains engaged at takeout team franchisees service. end are authorities our decisions. service. compares process, open the either at available quarter, and for the first Dine's of second restaurants XX% of fully which quarter and local, the This with enabling consisted us XX% crisis obtain off-premise latest primarily

safety accordance franchisees, in priorities. top mandates guests, government team As we the are our and and reopen of dine-ins members with health

throughout restaurants in addition as both team by In the our who the sanitizing including practices addition implemented safe local well guidelines and IHOP. the to are handling that not CDC food to limited and focus restaurant. touch to we've cleaning but on to ensure members Applebee's are sanitized, procedures include, common and points state These governments, procedures as provided operating own following at

want back, or and comfortable, restaurant we feel they to to choose we dine-in As ensure safe whether welcome to that guests continue off-premise. they

return restaurants. Our strong research a has have that shown consumers desire to to

categories was most In the out the fact, out dining the that consumer highest. brought five said top joy, of ranked them

value needs desires. equal cravability we'll enter we serve guests' as that we know continue normal new and and to As and a health view and to will safety dine-in, for guests our

necessary relentlessly We're our with the our equipped for with franchisees ensure and Our decisions and are franchisees taking worked information closely prepare that cross-functional we strong to have make across the pandemic working from has the in and a steps this our to on right so the to had competitive country profound coronavirus their businesses sound globe. can their The operations position. teams impact a restaurants, teams. emerge

As restaurant especially industry the know, you has hard hit. been

In profile model. industry our to our due the Brands analysts cash liquidity, As closed and makes a strong independent operators a more this advantage position Dine not of has of contrast, restaurants have has Collectively, withstand optimistic scale, result, which about estimate COVID-XX substantial us and number that an to me asset-light challenges survive. will a business facing future. enabled experienced industry, restaurant the that

share our our priority, increase restaurants. Looking ahead, call to growth. which to that there we of independent first an returning potential the turn focus of due competitive sustainable opportunities Tom on closure provide expected continue Tom? that, is to our we are overview believe to as to assess core quarter We'll near-term the to market landscape With now the business I'll results.

Tom Song

hope well. you, are Thank that Good I Steve. all morning doing you and families your everyone.

discuss financial has to our taken Given I'm Dine initiatives review I'll the the that decision quarter. the Then pandemic. financial during first the results for going and circumstances,

this position period fortifying our for responded industry. our challenging during financial we by First,

revolving a facility credit a from we of in borrowed As March. reminder, total million our $XXX

to At have we voluntarily of entire increased As the million, like I Dine end by of to cash $XXX.X the million our $XX.X is amount unrestricted. non-current to doubling restricted significant which due continue second reserve, strong and $XXX.X enhance balance liquidity interest cash million would strong. to of remains June highlight structure. on the sheet quarter, a our totaling XX, position that securitization its

quarterly of will example, we quarter interest addition today our common during payments have In for to we X. on our did voluntarily interest. future. as And already not securitization, fully for support and anticipate this the stock the the due foreseeable funding continue September further repurchase We accelerated of funded

mainly Turning as of to furlough compared G&A million staff of approximately XXXX. led corporate We to quarter difficult for the the costs. which million a the This $XX.X includes of in austerity, G&A. clarify to our was to some reductions quarter second decrease extreme reduce due lower $XX second to as expenses decrease discretionary quarter represents XXXX made this one-third to sharp well The our to would for capital during able which that were to as approximately decline. we like of in other I $XX.X million to our XX% gross very expenditures. compensation G&A decisions cash

consisted from franchisees. we financial as and The and implemented we franchisee we to royalty and of that for last at deferrals of are anticipate changing rent serve recall we of our the the from brands. support a for G&A for for To members resourcing measures team also the that year, some franchisees capital per March for primarily $XX previously figure enhancing both and of stability disclosed advertising our million and we quarter payments. franchisees, payments, our brands certain mentioned primarily IHOP furlough assistance both business provide However, aimed remainder quarter of April our assistance not expenditures

IHOP properties. further In did as we IHOP unit other our $XX new our deferrals, Additionally, provided approximately to obligations well aggregate, development are subleased as properties significant on $XX and deferrals our these million that Offsetting deferral our we received franchisees, nearly landlords franchisees our support. from for we franchisees of of leased themselves maintenance allowed the franchisees. million avail to for as remodel Most XXXX.

has programs the flows. the and financial dining restrictions COVID-XX in through offered, While somewhat franchising helped both room or mitigate to the cash impact effect CARES significant of and of the Act, deterioration franchisees, closures a caused Dine

then collections at result, like that of file at this debt of IHOP second by a benefit for during have franchisee franchisee an initiated as I we the XX to the period is in stable IHOP approved a As deferral new an point. disclosed, after bankruptcy. expense and of million In operated the XX sold brand's been fund position Applebee's creditors and XX us. ad a July, would locations that the Also for subsequently franchisee note strong were quarter. both $X assignment units recognized previously over each to and bad

we As in million, received $X.X represents recovery of a the fees. which part transaction, complete

to financial gears quarter results. second our switch Let's

share we loss EPS adjusted for per For of $X.XX the XXXX. $X.XX of of quarter second an compared to quarter adjusted same the of XXXX, reported diluted net

Applebee's to down of and at April ended XX% X, improvements IHOP comps at quarter. and the with brands represents IHOP XX% quarter very for points IHOP point week the XX% down at the respectively. the started Applebee's we weekly week down This points dramatically improved last and for of for percentage down percentage While both XX and Applebee's with low XX% a XX

results of Applebee's for the attributable losses our impairment million also reported most goodwill we You'll in to that and quarter, intangibles. of was over $XXX see recorded which

Turning securitization. towards

X.X the ratio would leverage times, for as ratio of we XX. adjusted from quarter times securitization covenants of quarters. note was are DSCR service of XX related debt robust debt Our the I our structure, $X.XX of times June than the leverage June violate up X.X which the our to four by EBITDA X.XX securitization. not that ratio ratio remains Under or as our payments X.XX greater coverage as make quarter of We principal required million, March exceeding end highlight any divided at in making that at leverage times, equal XX. or to X.XX times principal quarterly payment total is to is XXXX. when preceding like a to our Please fourth does of anticipate

ratio key DSCR first below measurement X.XX when a The tripped times. is is

So we to last have $XX EBITDA $XX.X Adjusted million XXXX second the compared was year's million second in of for quarter. quarter cushion. ample

Turning rate. to tax our

the $XX XXXX quarter for due second of expense quarter of non-deductibility the tax GAAP up of Our million. wrap X.X% The I'll effective XX.X% for for of was second benefit of the primary goodwill variance rate in positive Applebee's was to reason impairment the compared a last note. tax the on year. to the amount

promising include Our the in Applebee's off international two a IHOPs new Puerto We These quarter. one in in and Mexico is Canada, four Applebee's City third to restaurants. business start one in opened Rico. recently

in for into This to a developer. team. we a multiunit with India, our Skelton, IHOPs have and experienced in our executive and which entered development I our industry Moralejo, recently XX agreement to development QSR a very continue new welcome steps prior complements unit to executed We market onto remains and ensure, for responsive President also our liquidity Tony strong Division; while challenged, Dine's in Applebee's of remain agreement India late International like would for CIO us Justin To we key close, we XXXX. to franchisees. taken also maintain is

as We've mentioned complement our operations restaurant scale the which that, brands, over meaningful significant improvement when are now and John. both benefit Steve our Our business off-premise lifted. will any potential are further experienced to competition. brands sales turn from in at in have call restrictions restaurant well positioned industry dine-in contraction I'll With to on greatly

John Cywinski

Thanks, good sharing to good forward been looking and I've Tom morning, afternoon, these everyone. results.

we a here month all on spoke transpired review Given ago. to XX as provide since last I that's the unfolded days detail well in of QX as what's plan July. of about

restaurants quickly with start Let's business outperforming in March, emerged sales bit the had We and off-premise increase year. the category XX a temporarily and an posted momentum. to we the meaningfully to start context. model. X.X% through of dining positive comp Applebee's casual closed XXX tremendous consecutive of moved pandemic a delivering Pre-COVID, brand Once weeks March sales the about X,

The May a and dining were variable began real As rooms with most approximately June to capacity to to we results. our obvious dining we most government-imposed reopen, factors rooms, XX% as see represented constraints restriction. which declined as the began primary sales sales XX.X%, another dining down posting April Four momentum. closing sales began pre-COVID. geographies a represented impacted of business XX% XX.X%, in shift declined rooms of in result, QX capacity reopen meaningful our to XX% our a Once XX.X%, comp the was

discontinue our varies marketing we nature American all recovery in waiting the understandably Another all on a through to back right almost the the the XX time of And right been In this while revenue upon national the hiatus for was factor allowed limiting we've absolutely on we reintroduce as QX. media our and finally, is which ad cautious hindsight, of of chose geography. self-imposed to to March environment, this to America. strategy course, fund depending Applebee's replenish, consumer

representing cross-functional took Yet media be food beverage our I Operations contact at as today. And old respect lots while Back, news Kevin ready approximate Welcome staging, our am off-premise messaging. stated terrific social restaurants continuing is a case the safety, Officer, free the And positive we often to our about dining that business. a those this our today. this modify evolve to us with Applebee's about entrepreneurial the and it us was for to Officer, return portfolio. advertising upon environment. very we really parking to you've balance off-premise only see rooms. of to team. and closures our perspective permanent through has as genuine delivering our dining in mid-June time you, shutdowns in have some our XX The and Of I pandemic, the in hiatus, perfect are restaurants let's authenticity business national and again. received local pandemic guidelines new remarkable had Thanks remaining Chief this The our an to was and our the our our that year. combination pleased we Now talk top evolve XX% franchise and in Applebee's very unlocked the will for restaurant about governments standards. sanitation, digital creativity, in it of X,XXX them of everything ad plan a talk in a to expect standards. times talented crafted marketing I'm my for exceptional rooms, with four and in and most Chief our back by partners, of been we progress franchise dining momentum as this been particular, be are better beginning has that the Marketing point U.S., that I that couldn't do have Virtually open this returned to to playbook of In fluid restaurants well of take to And where simply restaurants than lyrics priority announce resilience. operating to written Carroll, New X,XXX X,XXX by Applebee's guests XX-day we prepared broadened guests July our to resonated room Joel safety we no all adversity good call there now March. message That a guests. restaurants their now and slightly outdoor currently a environment our leadership and were in always team precise Throughout to tonality more once fully the the cases are for plan teams have these of proud open brand different are members than early Yashinsky. in from as tough specifically certainly I've music York, this the the dining, and and and operational welcome is Jersey, moment were in I dining. New partners team South about associated hope media Philly was in Florida want to -- of appears that's elevated from all spirit we're many this certainly California, for to And agility Mexico, Remember is remember After as Kotter, our partners open see distancing, at of feedback it's given ago. in show. recent current best with back outdoor New with to those name I dining enough with have XXX we numbers to an around the months chance with temporary proving because our and to mode to the surprise. be

Irresist-A-Bowls illustrates the featuring, our great little of very innovation developed power notice ability as case team appealing current Officer, of a with certainly chain move our the And the the Bulgarelli. and by abundant to supply broadly supply value Applebee's here. is Culinary addition, was also fast example Stephen product In and brand importantly we're this their and Chief

Our restaurant operation, the reduction environment P&Ls have of resulting better costs. reduction benefited menu, food and execution this our in also in in labor in and substantial a simplification our a core from

sanitation. related upon some our of benefit heavier as offset Of by safety a to reliance and its course, packaging investments well and this cost is as off-premise

we So today. six let's comp as progress talk minus and QX, weeks. our about XX% past minus noteworthy June over XX% our to from where change picture steady saw sequential in After throughout early business provide stand complete and the momentum we sales a the in to average an of trajectory

a since comp past began. the XX, performance best XX.X% posting result While ending this July sales minus week our representing crisis

X,XXX and the restaurants weeks volume with is according $XX,XXX with of about off-premise. are At reporting Box XX% being XX% category. once to recent and sales dining average weekly dining dine-in of rooms, Additionally most of importantly, the open four our outperforming present Black casual Applebee's this again

off-soft competency more has our to restore position only of brand. payments, Applebee's than and now execution stream. important a as remain Interestingly, Now delivery. core volume positive appear a XX% well-positioned rate staying like in beginning this convenience this before. advertising to Carside about XX% to for the of Applebee's it's another and March-April We oriented really and my approximately of guests business premise From delivery. suggesting reasons would I'd deferral Applebee's is we fund Scott ever very a is perspective, royalty rooms, obvious relevance business reopen Applebee's has to ad we're of leadership off-premise positive off-premise XX% And digitally-led we and that highlight and To-Go XX% become royalty our On really of this holding be in as also most cannibalization the the income us our to be Gladstone. with segment after thrived power under note the dining To-Go of flow cash and and

allow. to the this brands In to closing, navigate over quickly we market Applebee's our environment, environment I return Americans full potential they been trust several conditions While hard its partners past months. and working of our this long-standing that as revenue uncertainties the business aligned in with choose remain believe franchise nurture will we XXX% trust to we've as in

the is turn supply over Looking forward, Applebee of confident Jay. its to our it likely contraction given particularly trajectory time. to momentum in restaurant well I'll I'm CDR With positioned continue that

Jay Johns

to I doing on well. Thank you're you, consistent impacted Good was of continued family governmental due IHOP's restrictions be the hope with industry dining by data. to morning This mandated to John. according COVID-XX. category everyone. the performance overall all effects restaurant operations

For temporary high sales as dine-in restrictions home remained quarter primarily with comp restaurant employment IHOP's traffic XX.X% continued challenged second stay declined due at and closures. to the orders statewide

weekly April However, improved since to X. that highlight our week second for I'd like comp the ending sales the quarter

sequential fact In second XX the weeks posted brand the quarter. improvement consecutive sales in of

Additionally dining comp during reopen with improved the week as sequentially every begin to rooms were XX%. generally allow to quarter around states traffic gradually which restrictions capacity

As by quarter July the performance our due governments the place dining in we spike. and put room reflected restrictions entered local to coronavirus resurgence and in third state the cases of

not Additionally, July. weeks through media the of three we utilize first did national

discontinued As marketing a local late first quarter and reminder except our off-premise some in basic campaign. brief for the a marketing we

in every daypart improved second daypart's performance, traffic sequentially and Regarding the month-to-month quarter. sales

from breakfast to across points and on less dayparts dinner people unemployment statewide improvement breakfast all behind even April rising overall stopping Mainly due respectively. sales their basis to for home launch at to were June remain work. was fairly approximately the essentially While way mandates and to XXX was there

occasion periods. breakfast pressure has compared snack faced experienced to category morning group, steepest declines. transaction the its meal According Additionally or NPD has in to general some breakfast the other

our However for off-premise rooms XXX% reopen. total home, sales leveraging by to of technology continued strong even for approximately guests. digital accounted sales driven grew sales of the started quarter XX the of generally with quarter XX.X% more primarily for XX% accounted Delivery percentage to business by by In of comp mix quarter. Off-premise second in to at people increased dining business, the convenience while traffic. I'm as takeout our pleased XX.X% second report meeting staying We're points support sales go and for to mix needs sales sales. the successfully our second growth

our experiencing doubled pleased I'm X.X% of to prior to to than collective ending of we've week to increasing a continue term is April pickup X% as compared seen during the launched week. the growth initiatives the XX. as drive say, to week meaningful Another week are growth the off-premise off-premise facet March June sales for ending growth We our The which progressive sustainable more ending X service platform total percentage sales curbside people was all on-premise XX. before believe will the of now utilizing for to-go pandemic.

a meals wider are IHOP pick and their the be or of delivered. As familiar guests convenience result a having up favorite ease range with to of

Now gears We of to April the let's dining on started domestic XX. reopening our switch rooms. status reopening

were our As temporarily which of Approximately domestic dining for delivery closed. X% business and takeout was only. system XX% June XX opened X% open of for approximately of for XX% was in-restaurant

restaurants or the July is domestic industry. XX, of a or on profound were Undoubtedly, open our having XXXX dine-in XX% coronavirus off-premise. As for impact

a a market continues independents number close survive and as IHOP of not IHOP are share traditional doors development. to permanently earlier. restaurants as through nontraditional actually provides This to mentioned opportunity expected increase significant their to its Steve grow independent As result some an for and scenario

continued in our confidence has our strategy. year brand this While and the in the reflecting by COVID-XX, their affected XX of restaurants the franchisees our first opened adversely growth year long-term half been

to be and safely to near-term sales and quickly last the traffic priorities levels. provide value to our most back our team importantly members Looking This a off-premise restaurants. guests in third, into by: are first, our and achieved our and to restore to ahead, guests secondly, year's to focusing propositions entice on business; provide of to environment compelling comfortable can come safety our grow continue restaurants;

to concerns dining based a still out, on While consumer proprietary strong restaurants had desire consumers there our return to is some about research.

all together, while across have we off-premise tie on emphasize to IHOP's and dayparts driving plans focusing also marketing Now sales. all to to this return broadly appeal

guests. sales good of believe well-positioned on sales a to advertising national the comfort IHOP second in family again demonstrate meets restaurant there withstand to to be News. I'm to state very work brand and a our started up, XXnd traffic, for recently progress over government restaurant on month. we way of our about the lowered. our the this been fact, optimistic leader the in that for of the and back needs turn return as are why consecutive headwinds on in sense I road operations done goal but to wrap I'll to In made the some Nation's dining over to improve To is We've is is quarter obviously. more according domestic comments. closing call ahead that, Steve XX restrictions and has Restaurant With current based years industry the ranked normalcy local

Steve Joyce

in weekly and traffic quarter. To during Jay. Thanks, posted comp improvement recap, both Applebee's the steady sales and IHOP

to-go guests as and position cash ample with We growth with substantial became deliver more to the the strong continued service. familiar quarter ended business off-premise a Our liquidity.

opportunities well-positioned expand we from headwinds the current withstand share. our to Lastly, and industry to benefit stand potential are to market

Operator? up open to have. may you the pleased be any we'll questions call Now, to

Operator

from Jake question Bartlett Mr. [Operator the -- queue Instructions] SunTrust. from from We have a

open, Your is line sir.

Jake Bartlett

at is I taking to make the the for questions. -- sure I first understand offering were think of thanks numbers Great, many the how one about given some I California My dine-in want back June. stores you've just was end down? currently shut are of after

stores dine-in, think, sales also similar weekly how get So, versus gauge clarify offering with does was hear stores the that. How those detail that to then, I'm period on in to comping compare with to and stores trying maybe I the just And terms a are just it XX,XXX. glad of average -- off-premise. really Applebee's only year? to last

Steve Joyce

Okay.

answer, start Applebee's. let's opened with restaurants then the John So, and

John Cywinski

most a basis. XX-plus the question this JK, have number come we Jay dining terms dining weekly is daily rooms, X,XXX down plus think, and back other California fluid. shutting speaks recent literally that It where on the fluctuates I and at Applebee's to John. on I'll being in after Yeah. open restaurants IHOP. lost, rooms is restaurants of

Jay Johns

Yeah.

basically restaurants. now got our got That's that restrictions us, that of of doing we've change. still guess mainly was we've said, at open on-premise got California have are our side, like footprint. driven to the X% XX% On a the restaurants I in the about we XXX X,XXX-plus XX% off-premise. for IHOP California, back system without We've larger restaurants moment. only. with by It's And are I closed are

does across to-go been our Applebee's about out in doing it think the XX% We've I that Clearly on has impact nation. of on an there. average us. business

in looking a numbers, up our in ticks at that open running comparison, location you a than for we in that they're -- at our little restaurants California have sales. I So of when down But, mean when less a obviously are goes if dine-in, look XX% down. just the all dine-in that as

you at about off-premise, average where restaurants down restaurants doing they're those look XX%. If only

clearly makes over have don't it if the difference a So, XX% you difference dine-in.

Steve Joyce

would $XX,XXX And last then be $X.X per average Keep about Jake brand, volume restaurant I year. annual referenced last million your restaurant $XX,XXX about weekly. weekly it's your volume, $X.X ago in weekly the as year final volumes to a million, mind that that be recent week for question, as drop question, would from XX%

improvement sequential So, we're we're month. getting seeing and each close,

Jay Johns

numbers I are to But those it's note on market. depending important highly think also that variable

occasion California, given some ahead. got that we've where the in are some got are struggling. close folks, are they to on restrictions in obviously were pretty So, particularly folks We've that

varying across it's quite and averages significantly are board. the those So,

Steve Joyce

Yeah.

an Jake that's think I important point.

comp you XX%. certainly a And have number sales. state a a comp that sales other of California -- we XX some at now have can And have we look you that like are positive have geographies minus of -- could where late. right You

Jake Bartlett

IHOP on math you can much versus like percentage shared roughly Applebee's side. we kind to for if be The just would do And great. us of you could that able down Jay, share think on I the help be dine-in off-premise, would the Great. side but the out

Steve Joyce

words, comp basis percentage XXX look system a delta were frame would The The – this dining see those rooms rooms total In XXX dining to I'll open in XXX be between down, XXX points. in you'd way. about point sales. performance basis just lift other the system to if between it delta

Jake Bartlett

those being the last restaurant declines us you've what on on that sales the of for basically some now and really on Have store I – you mean what flow, forward? last level. the shared then Great. at call kind margins with can had cash was update Just And breakeven experience sales changed rooms that question. estimates going open? would – kind dining if levels for you guess breakeven of It

Steve Joyce

why Tom, help that? don't with you

Tom Song

there Yeah. is tremendous amount a variability. Steve to Jake alluded as of

did from environment applicable also more provided stressed we is fee highly averages relief we on benefiting in that So program QX. in view the a indicate

is company range where at our you This visibility. are situations which our Applebee's. I obviously do of So lot variety cash depending portfolio, on a different closely South this and franchisees we experiencing speak They're – to flow that. monitoring have North operates we where our a located. of a point, will are and Carolina have

the for that to with data little EBITDA be four-wall gives a And entire And dramatic so performing hopefully, system. experienced just indication line we've a perspective obviously in bit in point. we improvements positive and profitability from portfolio of Applebee's as year, a is the there you so anticipate

Jake Bartlett

much. you Great. Thank very

Steve Joyce

by important that that's the has enhanced health, think obviously significantly franchisees with been And I point made we are very financial working program. is, which their Tom closely the our PPP Yeah. on

so franchisee everybody very need they with every stand groups when However, well individually we're as closely of them survive. with help people know we the terms we that leadership work and as working monitoring in will to where help single

Jake Bartlett

you. Thank

Operator

Wedbush. from of Your line Nick with next Mr. question comes the Setyan

open, sir. is Your line

Nick Setyan

obviously, great the and questions. of to closure to relative rates in a the – the of here address relative topline. the out to the cadence great July, couple see just to taking QX for and it's the concerns we are each bigger to Tom, the thoughts Thanks in we address, trends there It's also just assume QX get? are term? gross what margins safely margins the closures near were Can headed QX gross where of going it's for as kind bad around brand? as those unit your in that to And

Tom Song

Yeah.

wouldn't transferred had you as into But that. be provide some of tough give color then you because haven't know me example, were them get closures. some that of why franchisee. we to you the able circumstances, a a of we to it And it's we able reason had for the amount IHOP to So, the let We good guidance. normally, some a little Nick. some why context franchisee these – simply, is instance new updated on But suspended

And collections that be that during I so predictability is of of that the by that gross coming mentioned determine permanent going deemed there the obviously at lot we have our And good out release we but the getting did is is influenced as a to to to respect some closures our very news quarter, experience. are the of be strong program. difficult collections to point. this margins With

the monitoring So intended a program franchisees we now mentioned, had provided PPP our into we lot good The of very are believe liquidity as individual a the closely. system. And program relief Steve effect.

Steve Joyce

One see this we're quarter. business anything a like I going like almost this. been this sure I've hope seen other else never comment, in years. not I've to XX quarter

better getting it's and from better So got get it's here. to

I this seen period. like good a just forward mean, good momentum. moving some and and with I be to us quarter have remarkable never like it's a it's anything as So it just have behind

Nick Setyan

with about come about things? absolutely going on or had menu going back to there has the are then Are off marketing How Is has you Applebee's Yeah, Clearly, are back to thinking brands. we And we value the fair cadence? pretty How marketing focus? go really just the normalized a any thinking to short be year? period of all much worked. going innovation rest – periods to where periods you're long again? enough. those the for the of Are some both

Steve Joyce

Yeah.

their to efforts folks make in be. our let marketing our going And view But individual need on sufficient that that some when to we're are air to Let we general, me – opportunity. the we're both brands. sure is obviously, momentum. – had are planned believe address going interesting we momentum in have lot going drops every so that gaps, cause into thing year they're of for a but it that we they're the And carefully as the don't Applebee's to planned some There this.

increased Applebee's with doing now that doing neck members to obviously, IHOP's so the or point. level a we've communicating little the you of they're hoping that this digital. about Because or program at actually so running IHOP between to but are the pick-up looks of XX come What was and have significantly off-premise will make of that the our we we're to reasons is and Applebee's want we running million okay million recoup fact either like about positioning. come of the specials to and the are that want competition program that got and they're that ahead and a to into And we're want that to from showing XX competition sure efforts see lot we available dine. maintain that. neck obviously, they're pick-up and we restaurant we

so to grow us technology customers. side And some then a ability then as allows with little towards use we've and menu done obviously bring continue communicate additional And great own see more to our we device as where us bear that the to you'll digital shifting had a bit success. technology and your to

to going we those going You're into drive be on folks obviously that restaurant. digital off-premise to to air to commercials step then with us or think efforts the probably we're continue either up see and

IHOP? talk Jay want about So to little bit you a

Jay Johns

think, intentionally just for our money for went time will we would turned start of to calendar similar we on what more us more to we're using think air save back to a of what the typically the look without would month. marketing planning on the now. the And marketing I Yes. disclosing for time that off We think appropriate long this marketing time appropriate is XX the on doing I period do. We

And times we wanted to to you to is the rest closing other in is marketing scenes going This of I the already year. them as and again. still when behind pivoted fluid cetera. I do start we thing a et we'll situation California with think rooms of were to think the very see market, the continue we'll what we've that do that down can as dining a couple

don't for have of or dine-in back the we ton want those restaurants a message pushing restaurant restriction. spend they of get into marketing going to too a just capacity dollars open much aren't be So to a if

things. We So play what we're funds going situation we as goes the do the about off-premise to-go the balance decisions through talk be time how pivot the to value market, to what's by we of the will we innovation in keep marketing. have the what's we want we to to message. the will balance doing want be you We'll the make What closely. think and good capacity watching to do, the that restaurants, year about, all do supporting right of market and

John Cywinski

the then demonstrated this at on how know front this. we're in good pretty that. Applebee's to And effectively market Nick, environment. We've We

Our of that fund is That's healthy. was benefit XX-day will hiatus really That important. the continue taking market.

terms about demand out the maintain as top Our and of country objective and extraordinary dine-in we'll perspective sensitivity a guests have from to variability mind from everything how that an drive to the on both effectively across off-premise to demand. to in feel That's is of the awareness perspective dining our government environment. We the constraint can restrictions.

going that innovation this final less in And of be given quite be balance And question frank media significant become some there'll had some that seek would then reduced our menu needs currently I the different. operational a final is, your then that probably the benefits. those sports. and point actively hopeful value media restricted And will out. America innovation be We to to to of is make available. has its landscape orientation which environment vehicles I'm

November. an to in long less demand. as And the I which going generally time speaking is into And interesting come absence of election that be next year will As a have a anticipate go then have is result, inflation variable, the news. time we for media the good which landscape you first

Nick Setyan

Thank much. you very

Operator

of the line from comes Barclays. question next Your Jeffrey Bernstein Mr. from

open, sir. is Your line

Jeffrey Bernstein

because question expectation follow-up. Two wondering of And raise operators." much. for brands for your or what whether the to And and at seemed vulnerable then terms One it industry like or I is whole, is many guys very a questions. significant seen any your as opportunity already store just both does that less potential market more brand? yourself people just So think in in Presumably whether about I'm it "independent franchisees system or you. as of you had share either I'm particular brand closures a the vulnerable? you what independence Thank wondering one you've more I closures, Great. you think see creates talked

Steve Joyce

to let start ask So, then and speak. others me I'll

So look you're seeing or XX% seeing of people independents upwards we're the projecting same of are closing. numbers higher where that

that to when going be several buildings And a were is lot pre-virus there conversion. available obviously struggling. had brands So you of for

carefully. started. So some lot of obviously very a -- restaurants restaurants and numbers will closing were the you've that seen at A lot obviously, restaurants. We're, those close. before probably are all looking of marginal they of There some this they're

-- loss it's the is So this couple hastened sort potential a of just more of units.

get do long-term a for in those to major that are of replacements prepared well viability change out Now we're assist are either way and not on of think is also step the good not? it the we or at long-term with a okay, sense provided to restaurants, as margin makes them. probably a time to anyway systems, to out figure say, viewing have any try and prepared this to where as obviously We a We're restaurants individual look they we franchisees. and

for the to see So it's episode, strong upside of in that on for viewing what going to companies think a that we you're position it. comment talk? of at really think way a the Tom, and with brand far going this combination I is think are the we guys the efforts capabilities financial mostly is want that end And be good us. growth emerge you that's to what we're

Tom Song

Yeah.

are not with don't as all independent are affiliated thing We one as bringing appropriate. they're as view resources point And them back have independents resources. mention the think with whether of franchisees independents. to a but or your we I operators, national viewed and on brand obviously, I did our

we did very a step have in also We position liquidity We in. willing strong past. and that to are the

own portfolio Jeff. operated have We our company obviously

we probably apply at independents don't can disposal. so levers we of true have number that a their have that And

Jay Johns

opened just Keep I'd the I say of XX year. side. the the restaurants from we like said beginning in IHOP this Yeah. mind year at

opening lot a desire we're strong a planning on the we have that for restaurants side for and We this franchisees. year more IHOP on deferrals allowed growth that had

we out think engine history reasons restaurants to passes. long get find restaurants our Steve a new closed have down again to the and with of this we franchisees situations, or as said, varied, not, new ownership But lot be because finding is is why going going working there replacement those a or we some And is things with growth with So owners replaced once figure trying in a are viable does assess just it those a happen. group to reasons this little of situations or why different new and different with restaurant restaurant. a structure need

what time too is through those So trying we even, variables many those the have will might we're situations, restaurant think assess now. we any get just to of, that And all would things it's more like our to we're as closures. How save as not of kind temporary heard different look expect, a that going those -- I best decisions. right here we deal though about, through say, back a And restaurants have pretty or we lost to get a probably making these many you we closures soon. in we why to permanent back. That's get those because have franchisee, closure. restaurants Tom tend we're to we XX XX talk bankruptcy and

John Cywinski

is QSR XX-plus casual is reason the benefit significantly. scale particular you that look reliant this is vibrant independent, in restaurants dining. in who with brands percent which terms are one would It that all means of opportunity. casual well-positioned of restaurants strong will be dining category out stands independent is at categories, upon absolutely -- the category and John. Jeff look the And I'm casual disproportionately then fast bullish you and one if casual on the The dining, Applebee's in are

Jeffrey Bernstein

that make clarify, potentially thought just you I comments of Steve XX% beginning to to you heard independents about I closing. And you want mentioned hearing think of I numbers were correctly. of something -- -- your sure at the

Steve Joyce

they don't and I've that right I XX% most I've the to for seen are not. Yeah. seeing. those association the XX%. we've being numbers of been industry think number be to independent of those or seen Yeah, the also saying, the one-third total headlines in know could that's restaurant losses the XX% whether range.

So of bear ability I we and discussion and most brand can the think digital that's out why for them of just do scale to the and and this. the technology bring is seeing brunt around reach the independents awareness you're work

like under write restaurants, don't expectation but And as about so number come will throw And say is we They going people say close that is IHOP's they'll seen much couple back far. industry restaurants. we've which question look things there a reopened is instances our And and big bankruptcy. we the the think to closed pretty in they when but no terminal, number. don't articles case is XX of -- being these be they a in so the XX, some

restaurants some lot our our we'll growth So is to we're and expectation have we're going closures, of most keep have to of opportunity afterwards. but a then going

Jeffrey Bernstein

Understood. Thanks color. the for

Operator

of Partners. question MKM comes the next Your from line Levy from Brett

Brett Levy

propositions is? actually I for What to and see possible well. where safety? the costs Hope circle that my could sales rooms enough them to a you're try improvements only, of out were incremental expand all introducing dining in they it think any greater questions recovery? what gap if versus have or doing Are are kind to I'll call. different off-premise ask way we of you overwhelm get for your taking asked. to you're that you're answer. off-premise Thank the are making some those margins breakeven is back these the the look I can beyond you that that When that a those on were, different given operational of guess, for -- do the you try at units just if

Steve Joyce

a great that's question. So

So a the margin. I'm bit, little on Tom going weigh to have

way that with offset those on a here's safe guests been more costs to got are associates menu, about and moving. think grouped PPE, sure So, focus incremental really that, a the making from some have benefited We've are tightly are things it. the But associated safe. with probably

in brands both benefits have franchisees to down. And not that to their extensive working menus. Obviously had number bring have everybody like the try been of guests, different. of is this feels we one something with So

So to allowed way that provides hence allows as menu, the tighten this a conjunction franchisees with products the better in but a the the in proliferation kitchen. cost also And execution has on us management, better menu, in of the result.

our opportunity of the And of have to view period to that off-premise. over a out room is time. comparable maintain coming this, return So dining we levels,

of the line upside as is is, sales. at maintain opportunity I we're puts items guest standpoint kitchen, a than good bulk back a position this that lower efficiency the we recovery on we'll to off-premise this if Your profitable. fall. the us those a we know with gain before. different in higher as And as lot restaurant menu, revenue the number think, mine But Well, the be going the And in more a point. the probably more from to better a on of

in we're whether beef, pork, it's that seeing spikes whatever. cost food But well. of settle presumably or will or sort notwithstanding, out that's Now those as

is going return the for into dining than the forward restaurants provided better So it we room. the in back profitability opportunity probably was everybody

the is potentially And so, an long-term. we the feel two combination those upside of in

Tom Song

here. data points So give some me Brett, let additional

both So restaurants. brands' did reopening with the cost of of respect to incremental the to costs, teams onetime we ask operations the assess

that sanitation averaged per up week. ongoing indeed those And enhance cost So $X,XXX are about about to $X,XXX The out to borne restaurant. of costs approximately add per standards. to

are to incremental insignificant. not They they're restaurants. so the And

in dining at same. number to are both this I'm versus sales to it's going mode is look rooms only, that off-premise open, you lift available XX-point the brands, because are when There Now dining be are that rooms the open. to if apply about

respect point When averages you of you about out open to percentage rooms XXX%. closed. mind, keep at And So even again, rooms open, restaurants that's, XX put for in they're comps that lift. are are if brands if blend there got and rooms the -- a both those we dining not let's think open a dining we dining our look with open, are

that six-foot our an That's restaurants Carolina using or of typical very XX% open. distancing subject and as example, restrictions. rooms North they're South dining to So are

capacity performance those constrained. the even cap of puts in that on they're And are So sales that a restaurants some open.

Applebee's the a the there bar, or restriction past certain For is late on operations in night particular, hour.

we in feel country. things improve again, as So the

room room function of or it's digital of incremental open not, being And dining is think we some some improvement. these -- for not a there

with dining As open rooms lifted. have restrictions even restaurants those additional

Jay Johns

So IHOP standpoint. I would just state from an

you're our cost to there you you cetera. some If on and right? managing In reduce will more franchisees this with probably talk to some you get they tell food reduces how what puts are et ways, efficient takes menu

some labor, they're less we And prep cetera that masks as have because gloves, things now. the cost of the not amount before. franchisees the seen right et ongoing were making are takes, sanitizer, probably But that many outweighing doing for

So too to the tell probably would none if right many you, you takes enough talk puts now. they franchisees,

the what Because Steve do of And to-go out key a this. for have I this as off-premise. use top opportunity and people have huge was, said said, we line to taught Steve we leverage on think up. though capacity, profit. through how coming that of half to And back we to maintain, sales get higher lead and full dining can that. we've our to is that rooms are And flow going even increase gotten the with our things

us. for there they're sales, right But now. So We get it's ask they now back. you right if a not them top big opportunity working the while for down will line tell XX% still to in you got the is franchisees

John Cywinski

Nothing to end, Brett. add at my

Brett Levy

bucket kind then think extremely know those versus significantly there challenged system think or are is out you And financially? and handholding need in you your saying percentage might franchisees or that buying could interested about are like are the some if we help of in what it if just system still more. the either of And general, what bucket additional of what do healthy of franchise you you

are growth to to We algorithm. interested more. back get We want the building in

Steve Joyce

Yes.

I are tell existed will in the you it obviously pre-virus. the of variances health So there franchisees.

have that a we're franchisees of than the you all a PPP some And made will that so vast tell situations take to franchisees them able because more the at little clearly we I helped. going that. system. then advantage majority some the assistance as the programmatic working And base intense who we've the individual virus were that basis doing on and to individually or a That's the with to storm from program. we've opposed may got what started virus short-term when need before of on to bulk with are plan done weather --

what always done is -- we've that way. which so by And the

franchisees view pretty depends on our in so are recovery. is but good And general in the position also it

year so is to next it's if of will -- get you're franchisees then individual period what recovery rapid this into If figuring solution of an for shape. assistance and by or of we're some some need and some those back fall of to And extended bounce if going franchisees end end them restaurants. the out normal are them telling me best looks the next up the we're and relatively pretty year pretty in then that of and a good this going and year end long-term

look South making week-by-week flow. of if we're of not we money flowing are We're restaurants -- lot a in but you kind a is at cash our Northern it scenario of Carolina. So look cash

-- position. that in and not that's we've of so got -- lot a And franchisees

got We make a in are rooms closed, going franchisees -- some tougher also are money. great doing with that California and that any dining markets not is example well as nobody's of to

the funds -- franchisees assist sufficient withstand assets does then time sustain to of figure is we're into they the to positioning period. recovery their of recover? have and to a out And them or maintain help do how they going that period question either reopen And individually that to long-term then before last? long So to with

Brett Levy

much. very you Thank

Operator

from from comes question James. last of Your line Brian the Mr. Raymond Vaccaro

open. Your line is

Brian Vaccaro

Thanks taking for questions. yes. Hey,

the to back last So one.

at the few franchisee health. in You how were ago you guess a on disclosing past years the working operated what how additional franchisees help? relief talking I the more were But nice from probably that your willing a with, healed there. of of would franchisees and three of brand units about obviously a or many just franchisees receiving each And radar for are maybe bit just that little nine percent on be frame are did by many sort to job you

Steve Joyce

very situation. different the doing a Yes. we're and it's because is reason not that Well

with. nothing previous a and hurting that for there's for downturn the not profitability. -- the we answer So Applebee's the But is, it's handful franchisees. like not begin may or it's talking are everybody's -- There may obviously everybody's looking

starts that But cooperative longer And -- but doing not no program out is point. look there is slow -- this so of have we year there stepped a underway deep this -- take level this dramatically -- thing -- the at there and one into we're to don't end with at up is next the franchisees not dramatically. we're reasons a a of the if major sustainability term, the a a is changed the the year runs picture through not effort

Tom Song

hard -- Brian thing we're as revenue point the do business market conditions. full make the each one. considering is But one that as quickly I that to other And guess I'd is the possible the return an working obvious

rate of QX to sales. So us positive to towards give going important. QX visibility that is return some is

Steve Joyce

both with the pretty heard were nothing And Yes. for problems virus us. pre-virus well two the I out think and you've to they had turned do those about

Brian Vaccaro

Yes. Understood. Yes.

not be payments? paying case Okay. more recently percent rental brand still receiving status essentially in fees and recovered of are all level of business are now And relief And the the royalties franchisee on of guess what each franchisees has if advertising IHOP as clear deferrals? just I of to the some

Tom Song

franchisees was of conditions and a but with IHOP, Having on intents PPP all was also for pay, normative actually And not only money that, of so saw both the of collections struggling. they were we're brands. the numbers you of purposes, the that that to used to many one our Brian of said were rate there kind back employees respect to rent.

well a deferral rate the had on as we payment so And rents good the of after period.

Brian Vaccaro

of ask wanted some then Okay. made. back on I side were All to operational right. the changes Applebee's the to that And

to items menu, menu? compared the menu? streamlining how manage back the And the you've historical land of of that you to plan adding could help items removed? And terms where In could what ultimately frame to you percent the do

John Cywinski

a any menu of good question. over Hey, decades. of place John. the something The couple Brian, is a is taken brand proliferation mature that's This that in has

and items. dollar So off we've taken represent off complexity It one-third will of our that focused items like directionally high high volume, menu removed but XX% we've easily demand, guests low in the we items move on about we've probably stay have that one-third velocity, removed that -- are of the we menu. to

franchisees off. are take items, don't to other decide adding about of items Our we anticipate very additional And If to going terms in add and will proliferation strategic. items enthusiastic smart that. we're be I back,

And a pandemic benefits. a been our and while so operation simplified that guest has movement has for discipline place here. accelerated in which benefits to has The financial

Jay Johns

This Jay. is Yes.

get similar On most leave cut that be of may We very percentage we to the goes bit some ourself the we come that intend there'll new items was. side, little the it IHOP of by. leave We menu to space back to for as time more But we back thing. importantly, well. going by a and off some and did not a innovation that it's as think level

Brian Vaccaro

taken be factors Just in also operational important it franchisees seating? the COVID, on plastic could restaurants have that provide Okay. adding booth barriers on more how side, of the seating to measures expand outdoor or you whether those color frame expanded quantify to optimize then capacity have or during And kind the been?

John Cywinski

John Brian, here. Hey,

at additional and a adjacent of creativity separate high distancing. to a be flexiglass inside booths introduced tend been be They there be to allows can naturally can that. to We assumes a both -- we They're outdoor own have -- entrepreneurial. And this but has Those barrier capacity that creativity around Applebee's. And its tend have whether dining, quality. which that XX for successful. of of been around they lot items significant the restaurant partners then They've what need branded. that the anything it's are complexity, or there's and permitted X-foot see course eliminate

As Tom referenced cost.

whole initial there allows the a cost that these but is be good. face now basis. in place constraints. taking of that out-of-pocket of one-time recurring, maximize Some guys a won't their mean kind is lot capacity creativity on right All of to daily of I

Jay Johns

Yes.

interesting they've entrepreneurial. locally practices have do doing independent. they to the IHOP creative be problems. And system, very oftentimes where is we those survivals things. the it's out ways this they to similar to get is where they done find much that some we're things. is best what franchisees are share are system. Then we'll when a done in the things solve similar great side, we very franchise And as because their more to That On When at stake

allow of fact, with franchisees. recent to through In our do are execute them What how actually it walk with our them our call are what -- we will regular on the the this calls if to what and make it look your to to calls to it. on do municipalities had how specs town one local do steps hall the architect that. and We

been So they successful yes, planning. what it's very, are very

Brian Vaccaro

on. right. you. All Thank I'll it pass

Steve Joyce

Thanks, Brian. Thank you.

International National the put the Coalition, to just the for National Association in restaurants who about the in that industry. billion statement then June that out end there So were the overall which a by Restaurant Federation of Association, months pandemic, lost revenue, three the that of restaurants Restaurant and for for independent number our first ones the other they it $XXX have estimate revenues go Restaurant with franchisees. working assistance the is lost out XXXX. according says was of business the XX% than any sort the is of industry of more And out we're And jobs Coalition, why Association, more industry, question Retail and National for may Franchise Restaurant they the the Independent

numbers. sobering So

It a this opening the road get looks that there get higher one of with of revenues another we're significant but recovery seeing all about capital us we view And learned company. point, build road to this However, in put resume are and a there at lot full have and long to to take lessons that and a over from thing we time. position as to that's profitability a a result. crisis is our person's And a to growth momentum and strength restaurants is going trajectory vision opportunity. going and person's for and emerge excited the like is the higher then and a and a

our I want environment food. safe job creating do is So restaurants. safe everyone with time. close for We is a I that, say of just This and with thank good a staying you to great healthy hope healthy.

we So time thank to speaking your next and quarter. you you again for look with forward

Operator

call. everyone joining. conference you This concludes Thank for today's

You Have disconnect. may now a great day.

Dine Brands Global (DIN) 29 Jul 202020 Q2 Earnings call transcript